Overview
Financial markets, especially US equity markets, delivered a strong performance after US election at the start of November. The U.S. economy remains on a “soft-landing” trajectory, supported by a resilient growth, tight labour market, and steady consumer spending. However, there are signs of stress in the markets amid uncertainties around timing and intensity of potential tariffs, sticky inflation and tighter credit conditions, tempering spending growth. However, investments in AI, data centres, and government infrastructure spending are mitigating some of these challenges.
Key global economies, including the EU and China, exhibited mixed performance. In the EU, inflation moderated but concerns over low growth and cautious consumer spending created uncertainty. China’s economic policies aimed at stabilizing stock markets provided short-term relief but raised questions about long-term efficacy as there seems to be serious concerns over structural changes and struggling property sector.
While November saw generally favourable market conditions, risks persist, including geopolitical tensions, potential resurgences in inflation driven by threat of tariffs, and the uncertainty around monetary policies globally. The markets are likely to remain sensitive to both macroeconomic data and central bank actions in the months ahead.
Looking at the performance of major asset classes, equity markets outshined all other major asset classes. The U.S. equity market benchmark S&P 500 ended the month as a leader with strong 5.4% return driven by Trump’s victory and increased hopes for soft landing as US market continues to show resilience under difficult macro environment. The benchmark for shariah-compliant investments, DJ Islamic market index, increased by 2.6% while UK FTSE 100 index gained 1.7%. Although Chinese equities surged by 1.6% in the month amid a series of stimulus packages announced by the authorities, but investors still want more from the government on fiscal and structural side of things as fundamentals need to improve to support a sustained growth in the financial markets. On the negative side, the European equity market Euronext 100 fell 1.4% as European equities faced headwinds from low economic growth and inflationary challenges in addition to potential tariffs threats, both from US and China. In anticipation of higher for longer environment, yields started rising again that helped DJ Sukuk Index end the month with 0.3% upside. After a strong performance over the last few months, gold paired some gains and ended the month with just over 3% decline. Lastly, UK pound depreciated by 1.4% against US dollar as the later showed strengths backed by strong US economy compared to UK and other developed countries.
Market Snapshot
News & Key Events in November
UK
• Annual inflation rate in the UK went up to 2.3% in October 2024, the highest in six months, compared to 1.7% in September. This exceeded both the Bank of England’s target of 2% and market expectations of 2.2%.
• The Bank of England lowered its Bank Rate by 25bps to 4.75% in its November 2024 decision, as expected, marking the second rate cut in four years following the start of its cutting cycle in August.
• The GDP in the UK expanded 0.1% on quarter in Q3 2024, the smallest growth rate in three quarters, below 0.5% in Q2 and forecasts of 0.2%, preliminary estimates showed.
US
• The annual inflation rate in the US accelerated to 2.6% in October 2024, up from 2.4% in September which was the lowest rate since February 2021, and in line with market expectations.
• According to the minutes from November 6-7 meeting, Federal Reserve officials conveyed optimism that inflation is subsiding, and the labour market remains robust, supporting the possibility of further interest rate cuts, though at a measured pace.
• The US economy expanded an annualized 2.8% in Q3 2024, the same as in the advance estimate, compared to 3% in Q2. Personal spending increased at the fastest pace since Q1 2023 although it was revised slightly lower from the advance estimate (3.5% vs 3.7%).
• In November 2024 elections, Republican candidate Donald Trump has won with strong majority and declared the election victory as an “unprecedented and powerful” mandate to govern the world’s largest economy. His party has also won both chambers of Congress, giving the president-elect a considerable power to sanction his agenda.
Europe
• The annual inflation rate in the Eurozone accelerated for a second month to 2.3% in November 2024 from 2% in October, matching market expectations, preliminary estimates showed.
• The European Central Bank (ECB) has signaled growing consideration of rate cuts, according to the accounts of its November meeting.
• he unemployment rate in the Euro Area stood at an all-time low of 6.3% in October of 2024, unchanged from September and in line with market forecasts.
• France is struggling with a fresh political turmoil as its minority government is being challenged by the opposition anger over a planned austerity budget. At the heart of the dispute is the government’s plans for a budget involving €60bn of spending cuts and tax rises even with the minority in parliament, leading to threats of confidence vote from the opposition.
China
• China’s annual inflation rate stood at 0.3% in October 2024, compared with market estimates and September’s figure of 0.4%. This marked the ninth straight month of consumer inflation but the lowest reading since June, underscoring rising deflation risks despite Beijing’s stimulus measures in late September to support the slowing economy.
• The People’s Bank of China (PBoC) retained its key lending rates at the November fixing, in line with market estimates. The one-year loan prime rate (LPR), the benchmark for most corporate and household loans, was maintained at 3.1%. Meanwhile, the five-year rate, a reference for property mortgages, was held at 3.6%.
• China’s surveyed unemployment rate fell to 5% in October 2024, compared to market estimates and September’s reading of 5.1%.
Others
• The annual inflation rate in Japan fell to 2.3% in October 2024 from 2.5% in the prior month, marking the lowest reading since January.
• The annual inflation rate in Russia fell for the second month to 8.5% in October 2024, the lowest since May, down slightly from 8.6% in September.
• The annual inflation rate in Canada rose to 2% in October of 2024 from an over-three-year low of 1.6% in the previous month, overshooting market expectations of 1.9%.
• Israel and Hezbollah reached a ceasefire deal after both sides accepted an agreement brokered by the United States and France.
• Bitcoin experienced a significant price upside after the US election and was trading at nearly $97000 a token at the end of November amid hopes for loose crypto regulations under President-elect Donald Trump.
Disclaimer
This article is for information only. Please do not act based on anything you might read in this article. Past performance is not a reliable indicator of current or future returns. This article contains general information only and does not consider individual objectives, taxation position or financial needs. Nor does this constitute a recommendation of the suitability of any investment strategy for a particular investor. It is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any trading strategy to any person in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it would be unlawful to market such an offer or solicitation.
When you access a shared link of third-party websites, you are leaving our website and assume total responsibility and risk for your use of the third-party websites. We make no representation as to the completeness or accuracy of information provided at these websites nor do we endorse the content and information contained on those sites.